Reference no: EM132767572

QUESTION 1 - (a) The following were financial information of Smart Sdn Bhd for the year 2019.

Asset X RM Asset Y RM

Fair value less cost to sell 970,000 1,600,000

Value in use 1,100,000 1,300,000

Cost 1,350,000 1,980,000

Accumulated depreciation 80,000 100,000

i. Determine the impairment loss of Asset X and Asset Y.

ii. Show journal entries to record the impairment loss for each of the assets.

iii. Prepare the (extract) Statement of Comprehensive Income for the year ended 31 December 2019.

iv. Prepare the (extract) Statement of Financial Position as at 31 December 2019.

(b) Excellent Sdn Bhd building with an estimated useful life of 10 years was purchased on 1 January 2015 at RM2,000,000. An impairment test was made on 31 December 2017 when its fair value less cost to sell was RM950,000. The projected cash flow in respect of the building was:

Year Projected cash flow (RM)

2018 610,000

2019 528,000

i. Determine the value in use of the machinery as at 31 December 2017 using the rate of 8 percent.

ii. Determine the recoverable amount of the building as at 31 December 2017.

iii. Determine the amount of impairment loss.

iv. Prepare the journal entry of impairment loss.

QUESTION 2 - The objective of MFRS 136 Impairment of Assets is to prescribe the conditions and steps that an entity applies to ensure that its assets are not stated in an amount in excess of their recoverable amount in the Statement of Financial Position.

(a) Explain the objective and scope of MFRS 136 Impairment of Assets.

(b) An asset may be impaired due to many reasons due to changes in the market value or evidence of obsolescence. Explain TWO (2) elements of internal and external sources that could assist the entity in determining whether assets need to be impaired or not.

(b) Explain the procedure for an impairment review.

(c) Explain TWO (2) factors to consider when identifying value in the use of an asset under review?